8-KCorporate ChangesExhibits & Filings

COSTCO WHOLESALE CORP /NEW 8-K Report, Bylaw Amendment (Sep 16, 2020)

Filed September 16, 2020For Securities:COST

Summary

Costco Wholesale Corporation (COST) announced amendments to its corporate bylaws, specifically regarding director elections. Effective for the 2022 Annual Meeting of Shareholders, the company will implement a majority voting standard in non-contested director elections, meaning a nominee must receive more "for" votes than "against" votes to be elected. In contested elections, where multiple nominees vie for a limited number of seats, the existing plurality voting standard will continue to apply. This change shifts from a pure plurality voting system for all elections. The existing plurality voting rules and resignation policy will remain in effect for the upcoming 2021 Annual Meeting of Shareholders. This transition period allows shareholders and the board to adapt to the new majority voting requirement. Investors should note this change reflects a move towards greater shareholder voice in director appointments for uncontested situations, a trend observed in corporate governance.

Key Highlights

  • 1Costco's Board of Directors adopted amendments to the company's bylaws concerning director elections.
  • 2Effective with the 2022 Annual Meeting of Shareholders, majority voting will be implemented for non-contested director elections.
  • 3Plurality voting will continue to apply in contested director elections.
  • 4The current plurality voting rules and resignation policy will apply for the 2021 Annual Meeting of Shareholders.
  • 5The amendments modify Sections 3.3, 3.4, and 3.6 of the Company's Bylaws.
  • 6The full text of the amendments is available as Exhibit 3.2 to the 8-K filing.

Frequently Asked Questions

The primary change is the adoption of a majority voting standard for non-contested director elections, starting with the 2022 Annual Meeting. This means a director nominee must receive more 'for' votes than 'against' votes to be elected in situations where there isn't a contested election.

The amendments will become effective and will first apply to the Company's 2022 Annual Meeting of Shareholders. The existing rules will remain in place for the 2021 Annual Meeting.

In a contested election, where more candidates are nominated than there are open board seats, the existing plurality voting standard will continue to apply. Under plurality voting, the nominees with the most votes cast are elected, regardless of whether they receive a majority of the votes.

This shift towards majority voting in uncontested elections can be seen as an increase in shareholder influence over director appointments. It provides a clearer mechanism for shareholders to express their confidence (or lack thereof) in nominees when there isn't a competitive race for a board seat.